Tuesday, August 4, 2020

Madrid and Catalonia concentrated half of the growth of Spain in the last cycle

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Spain closed in 2019 a complete economic cycle that began in 2008 with the start of the economic recession after the bankruptcy of Lehman Brothers. Since then, it has experienced the entire crisis, recovery, cycle boom and slowdown before re-entering recession in 2020 as a result of the coronavirus pandemic. These 12 years of economic cycle have served to concentrate more economic activity and the population around the two great capitals and, above all, to raise Madrid as the great Spanish pole of growth.

In this complete economic cycle, Madrid and Catalonia have concentrated no less than 50% of all growth. In other words, one out of every two euros of additional GDP has been generated around the two big capitals. Data that duplicates the weight of the two communities on GDP. In 2008, Catalonia and Madrid together accounted for 36.9% of the country’s GDP. This means that its contribution to growth has been 35% higher than it would have had in a situation in which the entire country had grown at the same rate.

Jesus Escudero

The INE published on Monday the national accounting data for the year 2019 of the different autonomous communities. Between Madrid and Catalonia they already added 38% of national GDP. Almost two out of every five euros in Spain are generated in the two communities. Data showing how economic activity is more concentrated around large cities as a consequence of the ‘capital effect’.

This is a trend that is observed around the world as a consequence of the ‘servitization’ of the economy, that is, the boom in the service sector and globalization. Around the big cities a virtuous circle is generated: the big cities attract investment from companies and human capital so that they empty out the rest of the capital territory. It’s about the new 21st century ‘urban exodus’, which no longer only empties the rural world, but also affects the provincial capitals.

This effect of attracting financial and human capital to the big city is especially intense in Madrid. The community is, year after year, among the regions that grow the most. In 2019 it was the second, only behind Navarra, with growth of 2.5%. And in the accumulated since 2008 it is the second that has grown the most, only behind the Balearic Islands that has suffered the great tourism boom.

[La llegada de trabajadores cualificados a Madrid expulsa a las clases populares]

Catalonia It grew rapidly during the economic recovery, showing itself as one of the territories most resistant to the crisis thanks to its powerful foreign sector (exports and tourism). However, in recent years it has suffered a slowdown more intense than the national average as a result of the uncertainty generated by the ‘procés’, which has detracted investment in the region. The result is that its weight in the national GDP has decreased since 2016.

But the big cities not only create the difference during the expansionary cycles, but the gap grows more during contractions. As they are more dynamic economies, they overcome economic crises more strongly and widen their gap with the rest of the territory.

The weight of Madrid and Catalonia in GDP is much higher than their participation in the population from the country. Between the two they add up to 30% of the inhabitants, eight points less than their contribution to GDP. This means that their per capita income is also higher than the Spanish average. This situation is explained if it is taken into account that investment and human capital are concentrated in the two capitals, which makes wages higher and also the cost of living.

Madrid has the highest GDP per capita in Spain with almost 35,900 euros per inhabitant. This is no less than 35.5% higher than the national average, whose GDP per capita is 26,400 euros. For its part, in 2019 Catalonia had a GDP per inhabitant of 31,100 euros, 17.7% higher than the national average.

The economic growth of the two regions attracts more and more population. In fact, many jobs are only available in the two big capitals, which contributes to the accumulation of highly qualified human capital. The result is that they are emptying the rest of the territory and monopolizing immigration.

Since 2008, Spain has gained just over 1.1 million inhabitants. Of these, nothing less than 56% have settled in Madrid or Catalonia. On the contrary, there are communities that in these years have lost population, mainly as a consequence of the urban exodus.

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